They do exist - they only are called "gods", "demigods" or "spirits" (in the old RQ sense, not discerning between divine and animist worlds) of various enemy places, not limited to Chaos.

When trolls depict Death they have a racial memory (including a burnt nature on the skin of dark trolls) of dead Yelm invading the Underworld. Zorak Zoran is on par with Asmodeus...

And not limited to enemy places, too - the Orlanthi have Orlanth's kin among their mythical enemies, like Daga, Thryk the Ice Giant, etc, without even going to the identity of Ragnaglar. A deity like Storm Bull pretty much is a demon fighting on your side part of the time...

homerjsinnott wrote:It was a nucklavee which was a Celtic spirit who would stand on the banks of rivers in the shape of a horse and when someone touched them they would stick and be dragged in to the river to drown. Maybe also called the water horse.

The description is a Nucklavee (a warped cantaur with a human-like torso growing from a horse's back, with elongated arms, a pumpkin-large head split open by a gaping fanged mouth, and a single headlamp-bright eye - oh, and no skin). But the powers and 'water horse' name you ascribe to it are those of the Kelpie. Also Celtic.